Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

I seek leave to table an explanatory memorandum relating to the bill.

Leave granted.

I table the explanatory memorandum. I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

The Banking Amendment (Controls on Variable Interest Rate Charges) Bill 2010 provides legislative protection for banking customers from excessive interest rate increases on variable loans and mortgages above the increases announced by the Reserve Bank.

The Bill provides for a 24 month freeze on banks being able to increase interest rates beyond the Reserve Bank rate and aims to ensure banks pass on decreases to official Reserve Bank rates to customers.

Banks enjoy a position of overwhelming market dominance in Australia, with around ninety per cent of the national market in loans and advances.  This kind of market power leaves them free to increase interest rates in excess of official interest rate increased by the Reserve Bank.  These sorts of practices have resulted in ever increasing profits for banks at the expense of their customers.

In the 2008-09 financial year, Australia’s major banks announced massive net profits despite the global financial crisis.  For example, the ‘big four’ banks each posted profits between $4.7 billion and $2.6 billion, despite the global financial crisis. 

Despite these profits we have recently witness all of the "big four" banks increasing their variable interest rates by significantly more than Reserve Bank increases. These increases put pressure on Australians and Australian businesses.

As the Treasurer has recently commented, there is no justification for banks to move above the Reserve Bank. Indeed, according to APRA figures the actual cost of funds to the banks is less than the official cash rate increase by the Reserve Bank. A third of borrowing is done in overseas markets that are unaffected by Reserve Bank interest rate hikes. 

The Banking Amendment (Controls on Variable Interest Rate Changes) Bill 2010 amends the Banking Act 1959 to require Authorised Deposit-taking Institutions (ADIs) to

• not increase variable interest rates on loans and mortgages by more than Reserve Bank interest rate increases
• not decrease variable interest rates on loans and mortgages by less than the Reserve Bank interest rate decreases 

The amendments made by the Bill have effect for a period of 2 years from their commencement.

The Bill builds on the Banking Amendment (Delivering Essential Financial Services for the Community) Bill 2010 currently before the Parliament which provides legislative protection for customers including a ban on unfair $2 bank ATM fees, ensuring basic fee-free bank accounts, capping the level of mortgage exit fees, and introducing a variable rate mortgage product (“Fair Price Mortgages”) that will only permit genuine changes to the lender’s cost of funds to be passed on to customers.

I commend this Bill to the Senate.

I seek leave to continue my remarks later.

Leave granted; debate adjourned.